LONDON/PARIS Dec 5 Telecom equipment maker
Alcatel-Lucent <ALUA.PA > is close to hiring banks to back an up
to 1.4 billion euro ($1.8 billion) loan refinancing that will
provide more cash for looming debt repayments.
Goldman Sachs and Credit Suisse are among banks expected to
lead the refinancing, along with Citi and JP Morgan as well as
French banks, the sources said.
New loans backing the refinancing are expected to be raised
in the U.S. dollar market from institutional investors which
have greater appetite and liquidity to invest in loans for
lower-rated borrowers, the bankers added.
Alcatel-Lucent's strong presence in North America, where it
generates nearly one-third of sales through contracts with AT&T
and Verizon, will also offer support to raise
Alcatel-Lucent, like competitors Ericsson and
Nokia Siemens Networks, has been struggling this year
as big telecom carriers lower spending on network equipment and
price competition with Chinese players continues. It has
launched a programme of 5,000 job cuts in a bid to slow the rate
at which it burns cash through its business operations.
With its share price near historic lows, Moody's downgraded
Alcatel-Lucent's credit rating on Wednesday to B3 because the
credit rating agency does not expect the company to be able to
cut its cash burn materially below the 2011 level.
Alcatel-Lucent's shares are down 27 percent this year,
taking its market capitalisation to roughly 2 billion euros,
down from roughly 30 billion euros when it was formed in a
merger in 2006
"We are working with them to look to raise financing to
manage their capital structure and there will be significant
finance, but the numbers and structure have been moving around a
bit," one banker close to the transaction said, adding that the
financing could include a high-yield bond element.
Alcatel-Lucent was not immediately available to comment.
Another banker added that the financing could include an
Alcatel-Lucent's Chief Financial Officer Paul Tufano told
Reuters in November that it was looking at options including
asset-backed financing to strengthen its balance sheet. Sources
had earlier told Reuters that the asset-backed financing could
put up the group's submarine cable business or its patent
portfolio to secure the loan.
The financing would help address upcoming debt maturities,
with the largest due in January 2015. Alcatel-Lucent has 837
million euros of loans under its 1.4 billion euro revolving
credit facility that mature on April 5, 2013, according to its
Alcatel-Lucent's next large debt maturities are its 6.375
percent coupon bonds due in April 2014, with 462 million euros
outstanding and 1 billion euros under the company's convertible
bond due in January 2015, according to Moody's.